S&P 500, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Market Perspective

The personal consumption expenditures (PCE) index continues to climb toward the Fed’s stated 2 percent inflation target. For the month of March, core PCE rose 1.96 percent from a year ago. Another underlying inflation gauge, the Consumer Price Index (CPI), increased 2.4 percent from a year ago, the largest increase since February 2017. Producer prices, health care, and rent steadily increased in March, and the tight labor market will likely lead to increased wage inflation going forward. Based on the numbers, investors are pricing in the probability of a rate hike in June, and the odds of four hikes in 2018 rose to nearly 40 percent.

Clearly, the Fed is anticipating reaching its goal. Even though there has only been one month when inflation increased above 2 percent in recent years, the Fed has raised rates five times in the last 16 months. The Fed’s concern is leaving rates too low will encourage financial distortions that cause the next bear market.

Fun Story of the Week

Atlanta Gas Station Uses Valets & Oregonians Aren’t Pumped About New Gas Law
A Shell gas station in Atlanta has decided to hire valets to pump gas for its customers. These 1950s-style valets will pump gas, wash windows, and even bring customers their receipts, while they wait in the comfort of their cars. Meanwhile, Oregon lawmakers recently passed a law to allow self-service gas stations in rural areas. Rural Oregonians used to valet service aren’t very happy about the law, which could lead to a new Oregon Trail leading right to Atlanta.